Financial Management Test

Result

Financial Management Test - 31

Score
-
out of -
Rank
-
out of -

TIME Taken - -

SHARING IS CARING

If our Website helped you a little, then kindly spread our voice using Social Networks. Spread our word to your readers, friends, teachers, students & all those close ones who deserve to know what you know now.

Weekly Quiz Competition

Question 1
1 / -0

Which of the following definition of financial management is given by "Massie"?

A
Financial management is the activity concerned with planning, raising, controlling and administering of funds used n the business.

B
Financial management is that area of business management devoted to a judicious use of capital and a careful selection of source of capital in order to enable a spending unit to move in the direction of reaching its goals.

C
Financial management is the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations

D
None of the above

Solution

According to Joseph. L. Massie,
Financial management is the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations.
Question 2
1 / -0

Higher debt equity ratio $$\left(\dfrac{Debt}{Equity}\right)$$ results in ____________.

A
Lower financial risk

B
High degree of operating risk

C
High degree of financial risk

D
High EPS

Solution

A high debt/equity ratio is often associated with high risk; it means that a company has been aggressive in financing its growth with debt. If a lot of debt is used to finance growth, a company could potentially generate more earnings than it would have without that financing.
Question 3
1 / -0

Krishna Limited is a company dealing in ready-to-eat food products. Over the years, the earning potential of the company has gone up and it enjoys a good reputation. The Financial Manager is confident of the fact that not just the earnings of the current year, but of our future years are likely to be high. Identify the related factor of dividend decision being described in the given lines.

A
Growth prospects

B
Stability of dividends

C
Stability of earnings

D
Earnings

Solution

Other things remaining the same, a company having stable earning is in a better position to declare higher dividends. As against this, a company having unstable earnings is likely to pay a smaller dividend.
Hence, C is the correct option.
Question 4
1 / -0

__________ is the relation between various elements of financial statements expressed in mathematical terms.

A
Ratio analysis

B
Management audit

C
Internal audit

D
PERT

Solution

Under this technique, a comparison of the financial statements (profit & loss a/c and balance sheet) is done to find the trends of change in profits, assets, liabilities etc. Ratio analysis is the relation between various elements of financial statements expressed in mathematical terms. Ratio Analysis refers to analysis of financial statements through computation of ratios.
Question 5
1 / -0

A security which has a solid record of dividend payments and offer the dividend higher than the common stock is ______

A
Hedge

B
Holding period

C
Index

D
Income stock

Solution

Consider A.
Hedge: " A hedge is pooled investment fund that trades in relatively liquid assets and able to make extensive use of more complex trading".

Consider B.
Index: "In economics and finance, an Index is a statistical measure of change in a representative group of individual data points."

Consider C.
Holding Period: A holding period is the amount of time the investment is held by an investor or the period between the purchase and sale of a security.

Consider D.
Income Stock: An income stock is an equity security that pays regular, often steadily increasing dividends usually offer a high yield that may generates the majority of security's overall returns.

So, from the above discussion A security which has a solid record of dividend payments and offer the dividend higher than the common stock is Income Stock.

$$\therefore $$ Option D. Income Stock is correct answer.
Question 6
1 / -0

Amber Limited has been experiencing a downfall in its popularity, due to growing competition. Also the company doesnt see any forthcoming viable business expansion opportunities in the near future. So the management of the company has decided to declare high dividends for the current financial year. Identify the factor related to dividend decision being described above.

A
Stability of dividends

B
Stability of earnings

C
Growth opportunities

D
Cash flow position

Solution

Companies having good growth opportunities retain more money out of their earnings so as to finance the required investment. The dividend in growth companies is, therefore, smaller than that in non-growth companies.
Hence, C is the correct option.
Question 7
1 / -0

A company must adhere to the provisions of the Companies Act while taking the dividend decision. Identify the related factor of dividend decision being mentioned in the above line.

A
Preferences of shareholders

B
Access to capital market

C
Contractual constraints

D
Legal constraints

Solution

Certain provisions of the Companies Act place restrictions on payouts as dividend. Such provisions must be adhered to while declaring the dividend. Law and regulations play an important role while taking dividend decision.
Question 8
1 / -0

The working capital requirement of a business is not likely to be low when

A
When the rate of inflation is low.

B
When the raw material is easily available.

C
When the growth prospects of the business are high.

D
The scale of the business operation is small.

Solution

If the growth potential of concern is perceived to be higher, it will require a larger amount of working capital so that it is able to meet higher production and sales target whenever required. Working Capital facilitates smooth day-to-day operations of the business.
Hence, C is the correct option.
Question 9
1 / -0

Rohit, an experienced stock broker advised his client Prabhu to invest in the shares of Blue Angel Limited, as the company has declared high dividends since an increase in dividend is perceived as a good news and stock prices react positively to it. Identify the related factor of dividend decision being described in the above lines.

A
Growth prospects

B
Stock market reactions

C
Access to capital markets

D
Tax rate

Solution

Investors view an increase in dividends as good news and stock prices react positively to it. Similarly, a decrease in dividends may have a negative impact on the share prices in the stock market. Thus, the possible impact of dividend policy on the equity share price is one of the important factors considered by the management while taking a decision about it.
Hence, B is the correct option.
Question 10
1 / -0

Under which of the following situations a company is not likely to issue equity capital?

A
When the interest coverage ratio is high.

B
When the cost of debt capital is low.

C
When the debt service coverage ratio is high.

D
All of the above

Solution

1. The higher the Interest Coverage Ratio, lower shall be the risk of company failing to meet its interest payment obligations in debt financing.
2. A firms ability to borrow at a lower rate increases its capacity to employ higher debt.
3. A higher DSCR indicates better ability to meet cash commitments and consequently, the companys potential to increase debt component in its capital structure.

User

Question Analysis

Correct -
Wrong -
Skipped -

My Perfomance

Score
-
out of -
Rank
-
out of -

Re-Attempt Weekly Quiz Competition

Financial Management Test - 31

Result

Financial Management Test - 31

Score

-

Rank

-

SHARING IS CARING

Question 1

Financial management is the activity concerned with planning, raising, controlling and administering of funds used n the business.

Financial management is that area of business management devoted to a judicious use of capital and a careful selection of source of capital in order to enable a spending unit to move in the direction of reaching its goals.

Financial management is the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations

None of the above

Solution

Question 2

Lower financial risk

High degree of operating risk

High degree of financial risk

High EPS

Solution

Question 3

Growth prospects

Stability of dividends

Stability of earnings

Earnings

Solution

Question 4

Ratio analysis

Management audit

Internal audit

PERT

Solution

Question 5

Hedge

Holding period

Index

Income stock

Solution

Question 6

Stability of dividends

Stability of earnings

Growth opportunities

Cash flow position

Solution

Question 7

Preferences of shareholders

Access to capital market

Contractual constraints

Legal constraints

Solution

Question 8

When the rate of inflation is low.

When the raw material is easily available.

When the growth prospects of the business are high.

The scale of the business operation is small.

Solution

Question 9

Growth prospects

Stock market reactions

Access to capital markets

Tax rate

Solution

Question 10

When the interest coverage ratio is high.

When the cost of debt capital is low.

When the debt service coverage ratio is high.

All of the above

Solution

User

Question Analysis

My Perfomance

Score

-

Rank

-

Results Announcement on: coming Monday

Stay Tuned: We’ll update you on your result via email or SMS.